China telecommunications

Authorities grant fourth telecoms license

May 6th 2016 | China | Internet | Multiple companies

Event

The Chinese authorities have awarded a fourth telecoms license to a state-owned broadcaster, China Broadcasting Network (CBN), allowing it to offer internet, domestic telecoms and television services in the country.

Analysis

In a statement, the Ministry of Industry and Information Technology (MIIT) said it had decided to award the license as a means of spurring growth in the telecoms and broadcast sectors, while also adding to competition in a telecoms market dominated by three long-established players—China Mobile, China Telecom and China Unicom. The license is described as a basic business license, but it is hoped that the ability to offer "triple-play" internet, telecoms and TV services will give the new entrant a better chance at competing in the market.

The scale of the challenge for CBN is significant. China Mobile, for example, had a total of 834m mobile subscribers on its books in the first quarter of 2016, out of a total population of just over 1.36m in 2015, according to Economist Intelligence Unit estimates. It also enjoys healthy broadband subscriber numbers, totalling close to 61m in the same period. As of March 2016, China Telecom had just over 202m mobile subscribers, along with 116m broadband subscribers. China Unicom has equally impressive subscriber numbers, with 260m mobile customers in March 2016, along with 73m broadband subscribers. All three operators have been showing signs of strong subscriber growth in recent months, further reducing the chances of CBN making much of an impact in the market.

As well as the challenge posed by trying to catch up with the dominant players, CBN will also have to counter the limited growth potential for mobile handsets in the Chinese market. The number of mobile subscribers in China is reaching market saturation, at 98.4 subscribers per 100 people in 2015, according to our estimates, rising to 111 per 100 by 2020. There is also a question mark over CBN's capacity to spend the capital required to compete with the three dominant players. The new entrant is expected to spend around Rmb20bn (US$3.1bn) on its telecoms operations this year, equivalent to around 5% of China's total spending in the sector.